How much tax is owed for an investment in my small business?
I was thinking about contacting an investor, and they will want to know how much money I will need and for what. I am curious, in the US, if what I ask for should include any taxes, and also, what types of taxes one would expect to pay on the money being given to the business. A quick google search or three on the subject quickly got into subjects about corporate gains and investor interest profits... and I got pretty confused pretty quick.
In short, how much (or what rates/etc) will Uncle Sam take out of the money that specifically was invested into my company to pay for things, and should the said removed money be included in any projected budget of what is needed.
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This is not really directly answering your question, but I think it's something you need to hear, and it's too long for a comment:
Your business plan for your company you are considering starting should include a forecast of all of your expected revenues and expenses. This includes a forecast for taxes you will owe the IRS on the profits from your business. If your business plan does not yet have this type of information, it is far too soon for you to be asking investors for money.
It is often said that an 'idea' is worthless, it is only the execution of that idea that is worth something. If you only have an 'idea' for a business but have no track record of running a business and no proof that your concept will work, you should take some more time to consider how you can proof viability, before you approach investors. No investor will want to give money to someone without a business plan that includes a forecast of profits (which is backed up by evidence some how).
Do you mean how much income tax the IRS will assess? Loans are not income, therefore they do not incur income tax. So as long as the money isn't being given, but being loaned, you don't have to pay income tax on it. And just in case you think there's a loophole of "Instead of paying my workers, I'll just 'loan' them their paychecks, and then forgive the debt at the end of the year", no, the IRS does consider loan forgiveness to be a form of income. So you need to look at whether the loan is going to you, or whether your business is a separate legal entity that is getting the money.
If it's a capital contribution, then you are selling a stake in your company. Or, more precisely, as long as the money is going into the business, the company is selling a stake in itself. In that case, there generally isn't tax owed. Here's a Quara question that touches on this: www.quora.com/Is-money-raised-through-investors-taxed
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